Opposition spokesman on finance Dr Omar Davies said Thursday that the downgrade of Jamaica's credit rating by Standard & Poor's, highlights "clear deficiencies" in the management of the economy.

S&P on Wednesday cut the ratings on Jamaica's foreign and domestic debt from 'B-' to 'CCC+' saying it was concerned about the country's deteriorating fiscal position, and signalled that it expected conditions to worsen.

The deficit hit $35.85 billion in June, $4 billion worse than budgeted, while reve-nue collections were $7.7 billion off target.

Tax revenues underperformed by $6 billion.

"The downgrade and the negative outlook reflect our view that Jamaica's vulnerable fiscal profile, combined with difficult financing conditions, may compel the government to undertake a debt exchange that we could regard as a distressed debt exchange," said S&P credit analyst Roberto Sifon Arevalo.

Jamaica is in discussions with local banks and financial houses to restructure its domestic debt, but there has been no signal from the Bruce Golding administration that it plans to similarly renegotiate with its external creditors.

A 'CCC' rating signals that the ratings agency sees the debt issuer as 'vulnerable', and is an alert to investors that there could be interruption in servicing of the debt.

S&P says it expects Jamaica's borrowing requirements to reach 20 per cent of GDP this fiscal year.

"The debt profile is weak," said its release.

"Variable-rate domestic debt constitutes 58 per cent of total domestic debt. One-quarter of total domestic debt matures within one year."

Davies echoing S&P's "deep concern" charged that the government has not done enough to boost confidence, and has failed to demonstrate that it has control over the economy.

"Further evidence of the deficiency in economic management was publicly displayed in the presentation of the budget for FY 2009/10," said the Opposition spokesman and former finance minister. "Even to this date, the country is not certain about the precise revenue measures which are expected to finance the expenditure budget. What is known is that revenue flows are not only below projections, but below the levels of a year ago in current terms, despite inflation."

Davies charged, too, that the negotiations for a new borrowing arrangement with the International Monetary Fund were "badly" handled, and would not be a cure all for Jamaica.

Neither Finance Minister Audley Shaw, nor Bank of Jamaica governor Derick Latibeaudiere made the trip to Washington when the negotiations seemed to be at their apex.

Golding has said that details of the facility would be announced next week.

S&P meantime says any debt exchange negotiated by Jamaica will be viewed as "a technical default."

"The vulnerabilities in the government's debt profile may give it incentives to negotiate with its creditors, particularly its resident creditors, to extend maturities at below-market prices," said the ratings agency.

"In the government's last debt issue, it placed two-year debt at a 21 per cent coupon."

Added Sifon Areval: "While the government's engagement with the IMF is a positive effort to stabilise external pressures and going forward to address the long-standing structural issues, the negative outlook on the ratings signals the risk that a debt exchange, if undertaken by the government, could be an event of selective default under our distress debt exchange criteria."

lavern.clarke@gleanerjm.com